Apple Inc., the world’s most valuable company, jumped 4.3
percent to a record and surpassed $600 billion in market value
on speculation that production has started on a smaller version
of the iPad tablet as well as a new television product. Cisco
Systems Inc., the biggest maker of computer-networking
equipment, climbed 8.7 percent as profit and sales exceeded
analysts’ projections. Sears Holdings Corp., the retailer
controlled by Edward Lampert, surged 16 percent after reporting
a smaller quarterly loss.

The S&P 500 rose 0.9 percent to 1,418.16, bringing its gain
for the year to 13 percent. The Dow Jones Industrial Average
added 67.25 points, or 0.5 percent, to 13,275.20. On the last
day of trading, it touched the highest level since December
2007. The Chicago Board Options Exchange Volatility Index, which
measures the cost of using options as insurance against declines
in the S&P 500, slumped 8.8 percent to 13.45, a five-year low.

“Perhaps we ran out of sellers,” said Michael Shaoul,
chairman of Marketfield Asset Management, which oversees about
$2.7 billion in New York. “Better economic data helps.
Corporate earnings didn’t fall apart. If you’re not involved,
you could be a long way behind this market.”

Equities rose, sending the S&P 500 near a four-year high
reached in April, as data showed rising U.S. industrial
production while consumers and homebuilders gained confidence.
The reports helped ease concern that the European debt crisis
and slowing demand in Asia will weaken the U.S. recovery.

German Priorities

Investor concerns over Europe also faded after German
Chancellor Angela Merkel said the ECB’s insistence on
conditionality in return for help to lower borrowing costs in
indebted countries matches her country’s priorities to end the
crisis in the euro region. A person familiar with the matter
said Spain is about to get an emergency disbursement from a 100
billion-euro ($123 billion) bailout package.

American companies, which posted the weakest results since
2009, have beaten earnings estimates for a 14th straight
quarter, according to data compiled by Bloomberg. More than 72
percent of S&P 500 companies reported second-quarter profits
that topped projections even as 59 percent missed sales
forecasts.

Stimulus Bets

Since reaching a four-month low on June 1, the S&P 500 has
climbed 11 percent amid bets on economic stimulus. The rally has
pushed the gauge to a valuation level of 14.4 times reported
earnings, which is still below the average since 1954 of 16.4,
data compiled by Bloomberg showed.

Stocks rallied amid a slowdown in volume as vacationing
traders awaited policy clues from the Federal Reserve’s summit
in Jackson Hole, Wyoming. On Aug. 13, U.S. equity volume reached
the lowest level since at least 2008 excluding holidays. About
4.5 billion shares changed hands on all venues that day, the
lowest level in data compiled by Bloomberg going back four years
that excludes the days surrounding New Year’s, Christmas,
Thanksgiving and Independence Day.

Fed Chairman Ben S. Bernanke will have a chance to talk
more about policy options at the Kansas City Fed’s conference
Aug. 30 to Sept. 1. His speech at the 2010 conference set the
stage for a second round of asset purchases. Faster job growth
is needed to push down an unemployment rate that has been stuck
above 8 percent since February 2009, according to Northern Trust
Corp.’s James McDonald.

‘Fragile Recovery’

“The recovery is fragile,” said McDonald, chief
investment strategist at Northern Trust in Chicago, whose firm
manages $704.3 billion. “As we look at what the Fed is going to
do, I would say that they will still lean toward some further
accommodation. If we get better data between now and the
September meeting, they might pull back.”

The Fed next month will hold off from a third round of bond
buying, known as quantitative easing, amid better economic
figures, Goldman Sachs Group Inc. said in a report.

So-called cyclical companies, which generate profits that
are more sensitive to changes in the economy, had the biggest
gains in the S&P 500 among 10 industries. Technology and
clothing retailers climbed at least 1.8 percent. Utility,
health-care and phone companies in the S&P 500 declined.

Technology shares, which comprise 20 percent of the S&P
500, have rallied for five straight weeks in the longest run
since April.

Apple, Cisco

Apple jumped 4.3 percent to $648.11. With tablet sales
predicted by research firm Yankee Group to overtake those of
personal computers by 2015, Apple is introducing a smaller iPad
model to fend off challengers to its top-selling device. The
tinier iPad may go on sale by October and a new television could
reach stores by 2013, according a research report from Peter
Misek, an analyst at Jefferies & Co.

Cisco Systems added 8.7 percent, the biggest weekly gain
since 2009, to $19.06. Chief Executive Officer John Chambers has
cut 7,800 jobs, shut businesses and reduced prices to win
business lost to Juniper Networks Inc. and Hewlett-Packard Co.
and combat a slowdown in Europe, which makes up a fifth of
sales. The company boosted its dividend by 75 percent.

Sears soared 16 percent, the most in the S&P 500, to
$59.49. The company has been working to keep the retailer’s
inventory in line with customer demand, with domestic levels
decreasing by $512 million from the year-ago period. The lower
cost of sales in the quarter helped Sears’s gross margin widen
to 26.7 percent of sales from 25.7 percent a year earlier.

Remodeling Projects

Home Depot Inc. gained 6.9 percent to $56.73, the highest
price since 2000. The largest U.S. home-improvement retailer
reported second-quarter profit that topped analysts’ estimates
and raised its forecast for profit this year as customers spent
more on remodeling projects.

Abercrombie & Fitch Co. jumped 12 percent, the most since
April 2011, to $35.93. The teen retailer authorized additional
share buybacks and reported second-quarter profit that topped
the company’s preliminary report earlier this month. It also
said in a statement that it will be “disciplined and
judicious” with shareholder capital.

Target Corp. added 2.1 percent to $64.14 after raising its
annual profit forecast as the second-largest U.S. discount
retailer increases sales by adding groceries and enticing more
spending from customers with a discount card.

Homebuilders Jump

A measure of homebuilders in S&P indexes jumped 5 percent
to the highest level since April 2008. PulteGroup Inc., the
largest U.S. homebuilder by revenue, climbed 7.2 percent to
$13.38. KB Home, the Los Angeles-based homebuilder that targets
first-time buyers, rose 6.8 percent to $11.04.

Staples Inc. tumbled 15 percent to $11.34 after the office-supply retailer cut its annual sales and profit forecast amid
slower growth in the U.S. and tepid demand in Europe.

Wal-Mart Stores Inc. slumped 2.3 percent to $71.99. The
world’s largest retailer retreated as its forecast for profit
this year trailed some analysts’ estimates amid slowing sales
growth in the U.S.

Deere & Co. retreated 3.1 percent to $76.94 after cutting
its full-year profit forecast as sales slow in Asia and Latin
America, undermining the growth strategy at the world’s largest
manufacturer of agricultural equipment.

Facebook Inc. plunged 13 percent to $19.05, the lowest
price since its initial public offering in May, after the end of
restrictions on share sales by its biggest investors. The stock
traded 50 percent below its IPO price of $38.

Investors also watched second-quarter filings from asset
managers, which showed a shift to stocks that are least tied to
economic growth. Asset managers increased holdings the most in
health-care stocks and companies that make household goods on
concern about an economic slowdown. They reduced weightings in
technology and energy shares.

Johnson & Johnson, the biggest health-care products
company, had the largest increase in money managers’ positions,
according to second quarter regulatory filings from investment
firms with at least $100 million in U.S. equities. Apple had the
seventh-biggest decrease in ownership.